Shleifer To Resume Teaching

Professor, embroiled in fraud scandal, will return after one-year leave

Andrei Shleifer ’82, the economist embroiled in a fraud scandal that cost Harvard $26.5 million to settle, will return to teaching here this fall.

Shleifer, who was on leave this year, confirmed in an e-mail Thursday that he will be back to teaching Economics 1030, “Psychology and Economics,” his popular course co-taught with Professor of Economics David I. Laibson, as well as a junior economics seminar and a graduate course on law and economics at Harvard Law School.

But Shleifer will likely return with the controversy around him still swirling.

An 18,000-word article in January’s Institutional Investor magazine detailed Shleifer’s alleged efforts to use his inside knowledge of and sway over the Russian economy in order to make lucrative personal investments, all while leading a Harvard group advising the Russian government that was under contract with the U.S.

Neither Harvard nor Shleifer have admitted guilt in the matter. But a federal court ruled in 2004 that Harvard had breached its contract with the U.S., and that Shleifer and an associate were liable for conspiracy to defraud the government.

Last August, Harvard paid $26.5 million to settle the lawsuit, in addition to $2 million that Shleifer paid himself.

The controversy reignited on campus in February, as professors cast the details described in the Institutional Investor article as instances of favoritism and misconduct by Lawrence H. Summers.

The outgoing University president is a close friend of Shleifer, and the article suggests that Summers shielded his fellow economist from disciplinary action by the University.

Indeed, there has been no known action taken against Shleifer yet. But the Financial Times reported in March that Shleifer was under investigation by the Faculty’s Committee on Professional Conduct, and some professors have called on Harvard to issue a public accounting of Shleifer’s dealings in Russia.

The controversy has exposed a sharp split inside the Faculty of Arts and Sciences. While some professors outside the economics department have lambasted the University for not taking any action against Shleifer, many economists here have publicly defended their John Bates Medal-winning colleague as a vital intellectual asset.

“We think about him not as the guy who was involved in the AID lawsuit­—we think about him as the exciting, intellectually active colleague that we’ve always known,” Laibson said on Friday, referring to the U.S. Agency for International Develoment, which directed Shleifer’s group.

Meanwhile, Andrew D. Gordon ’74, the chair of the history department, last week called the defense of Shleifer on the strength of his academic achievements an “astounding” argument.

“If somebody has acted unethically or illegally, the fact that he or she is a Pulitzer Prize winner or a Nobel Prize candidate is totally irrelevant,” Gordon said. “I’m very puzzled to hear that from economists who are usually very logical thinkers.”

While Gordon said “it would be logical” for the Faculty to issue a public report if, in fact, he is under an internal investigation, Laibson said he wasn’t sure.

“I have no idea if such a report would clear the air or further inflame an already tense situation,” Laibson said.

Georgios N. Theophanous ’06, an economics concentrator who had Shleifer as a thesis adviser, called the professor a “very accurate” speaker and “remarkably energetic” thinker. He also rejected the relevance of Shleifer’s legal troubles to his standing as a Faculty member.

“He is an excellent professor and does remarkable research and those to me are the two main criteria that you should be using in deciding whether or not he’s going to be a valued professor,” Theophanous said. “The other stuff, that is for other people to worry about.”

—Staff writer Anton S. Troianovski can be reached at atroian@fas.harvharvard.edu.